Acute moderate intensity exercise has been shown to improve cognitive performance. In contrast, hypoxia is believed to impair cognitive performance. The detrimental effects of hypoxia on cognitive performance are primarily dependent on the severity and duration of exposure. In this review, we describe how acute exercise under hypoxia alters cognitive performance, and propose that the combined effects of acute exercise and hypoxia on cognitive performance are mainly determined by interaction among exercise intensity and duration, the severity of hypoxia, and duration of exposure to hypoxia. We discuss the physiological mechanism(s) of the interaction and suggest that alterations in neurotransmitter function, cerebral blood flow, and possibly cerebral metabolism are the primary candidates that determine cognitive performance when acute exercise is combined with hypoxia. Furthermore, acclimatization appears to counteract impaired cognitive performance during prolonged exposure to hypoxia although the precise physiological mechanism(s) responsible for this amelioration remain to be elucidated. This review has implications for sporting, occupational, and recreational activities at terrestrial high altitude where cognitive performance is essential. Further studies are required to understand physiological mechanisms that determine cognitive performance when acute exercise is performed in hypoxia.